Wednesday, 13 September 2017

Yeah, I've got a PR email from Coutts. 'Who?!' From Coutts, Voice. Open your ears! 'I ain't got no ears, boss. I'm just a disembodied voice from the astral plane. You know that, so deal with it.' Okay, okay. Enough of you.

Let's hear from Alistair Jex, head of bespoke portfolio management at Coutts ...

The upcoming 19th National Congress of the Communist Party of China has important implications for the global economy.

China might be a one-party political system but behind the scenes various factions work to usher in supporters and kick out rivals. Twice a decade these power struggles play out when senior politicians hold a National Congress to approve the line-up that will govern the country for the following five years. The next gathering is scheduled to start this autumn.

Okay, okay. Does this have anything to do with finance? 'Give him a chance, boss.' I've given him a chance, man, but he's just wittering on about the communist party. 'Give him another chance.' All right. Come on, Alistair, my son. You need to up your game.

There is little doubt that Xi Jinping will continue for a second five-year term as General Secretary. Mr Xi has spent his first term consolidating his grip on power, largely through an anti-corruption campaign to rid himself of opponents. Yet who gets promoted to other senior positions could affect the country's policies and goals for economic development.

For crying out loud! 'Boss -'

What happens in China is important for the world economy because it is one of the main engines of global growth. After achieving double-digit rates of expansion for more than three decades, the rate of growth in China's economy began to slow in 2010, falling to 6.7% by 2016.

This fall coincided with a flight to safety in investment. Investors feared a global recession led by China but at the time we felt that this was unlikely and maintained our exposure to risk assets. While performance in our portfolios suffered in the short term, 2016 as a whole turned out to be a boom year for equities and our investment performance over the year ended up being top quartile across nearly all of our mandates.

Well, that's a bit better, I suppose. 'It's a lot better! You're a hard man, boss.' I know, Voice, but I judge people on their results. / Okay, okay. It's just blah, blah, blah, uh, at the moment. I think we can skip to the positive outlook -

A POSITIVE OUTLOOK

Coutts currently has a neutral exposure to China relative to our long-term investment strategy, as part of our allocation to emerging markets as well as a country-specific fund that is likely to benefit from rising domestic consumption. We see the prospects for China as broadly positive in the future and see no reason to change this view at this stage.

Regardless of the outcome of the upcoming political reshuffle, we believe China's long-term economic policies will remain largely unchanged. Its leaders are likely to continue to tackle the problems of excess debt by reining in leverage and slowing broad credit expansion.

Despite the difficult economic, social and political challenges ahead, Coutts remains positive on China's growth outlook as well as the investment environment. Investment opportunities include multinational companies with substantial revenues from China, Chinese companies listed on developed market stock exchanges and professionally managed funds that invest directly in Chinese companies.

Right. Well, we got there in the end. Thanks, Alistair! / Obviously, I don't endorse any of this, dear reader(s). If you want to invest in China, that's your business, but don't get me involved. I'm just playing my guitar and writing songs these days. That's all I know.

...

Anything else? Music? My music? Well, I probably will put those three ballads on the demo, with one "pop" song. This is the last music update, by the way. 'Ha!' It is!